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Icahn buying up Caesars stock, but what is his ultimate goal?

Oftentimes, the final intentions of corporate raider Carl Icahn are unclear when he focuses on the stock of a troubled company.

Name an industry, and Icahn has probably dabbled in it. Trans World Airlines, U.S. Steel, King Pharmaceuticals, Motorola, Blockbuster, Marvel Comics, Netflix and Apple have all caught varying degrees of Icahn’s interest going back three decades. More often than not, Icahn has improved his initial investment.

Corporate raider Carl Icahn

The gaming industry has also been part of the mix.

Last week’s news that Icahn, 82, is building a stake in Caesars Entertainment shouldn’t surprise anyone. After all, he has more than $1.8 billion burning a hole his pocket following the sale last year of Tropicana Entertainment to Gaming and Leisure Properties and Eldorado Resorts.

And Caesars has enough blood in the water to attract Icahn. The company is a little more than a year removed from a complicated bankruptcy reorganization, has an unsettled CEO situation, and activist shareholders are raising a ruckus after the stock price lost nearly 50 percent of its value last year.

But what is his endgame? Even Icahn probably doesn’t know yet.

On Friday, when news of Icahn’s interest broke, Caesars shares gained 9 percent on the Nasdaq with more than 46.4 million shares traded, double the average daily volume. Another 26 million shares were traded Monday, and 14.8 million shares were dealt Tuesday. Shares of Caesars closed at $8.75 Tuesday.

Icahn has dabbled in the casino business, with some success, over the years.

He took control of the bankrupt Trump Entertainment Resorts in 2009 and sold two of the company’s three Atlantic City casinos. He still controls the closed Trump Plaza, which has sat vacant on the Boardwalk since 2014. Icahn has resisted Atlantic City’s attempts to demolish the eyesore.

In addition to the seven-casino Tropicana Entertainment, Icahn owned American Casino & Entertainment Properties. He sold the four-casino company, whose holdings included the Stratosphere in Las Vegas, in 2008 for $1.3 billion.

Icahn also bought the bankrupt, roughly three-quarters completed Fontainebleau on the Las Vegas Strip in 2009 for $156 million and spent several years auctioning off furnishings intended for the building and other pieces of equipment, including specially-made escalators and a construction crane. Icahn eventually sold the unfinished project to a New York developer in 2017 for $600 million.

According to the Forbes 400, Icahn is No. 16 on the list with a net worth of $16.6 billion.

Which brings us to Caesars.

When he bought the Fontainebleau out of bankruptcy court, Icahn all but told me in a phone interview he had no plans to finish the project. He said his company often “buys the shit nobody wants.”

Caesars operates nearly 40 casinos and resorts in 13 states under the Caesars, Harrah’s, Horseshoe and Bally’s brands. The company also owns the World Series of Poker. The 30-month reorganization shed more than $12 billion of debt from the company’s books and created the real estate investment trust VICI Properties, which took legal ownership of 20 Caesars properties. The casinos were then leased back to Caesars.

Many of Caesars’ stockholders, holdovers from the bankruptcy, are naturally unhappy with the share price and the company’s direction. They’ve made their voices heard, especially to current CEO Mark Frissora. In a quarterly conference call in August, he acknowledged dissatisfaction among investors “not in it for the long haul.”

Some investors have lobbied for Caesars to part ways with several casinos. The off-Strip Rio, the annual home to the World Series of Poker, is the casino most often rumored to be on the block.

In November, Frissora said he would leave Caesars on Feb. 8. But with the search for a new CEO slowed, his departure has since been delayed until the end of April.

Last fall, Texas billionaire Tillman Fertitta offered $13 a share for Caesars and would have combined the company with his Golden Nugget casino empire. Caesars acknowledged in November that the proposal was rejected by the company’s board. It would have made Fertitta chairman and CEO of the combined business.

Fertitta is not a corporate raider. He owns the National Basketball Association’s Houston Rockets and dozens of nationally known restaurant brands through his privately-held Landry’s hospitality company.

It seemed like a natural mix when the offer was first leaked.

News surrounding Caesars has often appeared schizophrenic since before the bankruptcy filing, when the company had nearly $23 billion in debt. For example, Caesars has one of the nation’s leading online gaming businesses, but that could be in jeopardy following Monday’s Department of Justice opinion on the Wire Act, which could halt Internet gaming expansion.

With Icahn looming in the background, Caesars’ is again a gaming industry question mark.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.